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Ecopetrol (EC) Projects Higher Investment on Projects in 2019

Ecopetrol S.A. EC released financial and operational plan for 2019.

For 2019, the company projects investments between $3.5 and $4 billion, up 16-33% from the estimated figure in 2018. The company increased spending on exploration and production projects.

Of the total investments, more than 80% will be allocated to upstream operations. Of the amount, 90% of the investments will be made in Columbia. About 8% is expected to be spent in establishing the company in prospective basins in the United States, Mexico and Brazil. In 2019, exploration capex is expected to increase to more than $460 million from about $250 million in 2018.

Ecopetrol also stated that it intends to make investments between $3 billion to $3.5 billion in 2018, even though it had just spent $1.79 billion through the third quarter.

For 2019, the company projects production to grow in the range of 720,000-730,000 barrels of oil equivalent per day, above the previous projection of 715,000-725,000 barrels per day projected for 2018. The addition of proven reserves is likely to be equivalent to 100% of oil and gas production.

The refineries at Barrancabermeja and Cartagena are projected to process 350,000 to 375,000 barrels of oil per day, with expected throughput of 223,000 barrels per day at Barrancabermeja and 152,000 barrels per day at Cartagena. The refineries are likely to continue the appraisal of profitable alternatives to facilitate higher supply of clean fuels for Colombia as well as improved refining margins.

In 2019, various operating regions are expected to witness higher levels of activity. More than 700 development wells are expected to be drilled along with about 12 exploratory wells on Colombia onshore and will have double the number of rigs on operation. Other activities include the acquisition of more than 50,000 kilometers of seismic and the development of 15 improved recovery pilots.

Per the plan, capital will be allocated toward initiatives related to a non-conventional hydrocarbon pilot in the Middle Magdalena basin. The company expects to continue the valuation and development of gas discoveries on Colombia's Caribbean coast.

In 2019, the net profit breakeven price is expected to remain at about $36 per barrel, indicating the company's flexibility amid the fluctuations in the price of oil. Brent price is anticipated in the range of $55-$65 per barrel. Per the plan, a return on average capital employed (ROACE) of more than 10% is estimated that will rank Ecopetrol as one of the companies with higher value generation among.

The investment will support the company’s plan to enhance production and explore more oil to replenish diminishing reserves. As a result, Ecopetrol plans to increase investments in oil infrastructure by 15% compared with 2018 levels.

Zacks Rank & Stocks to Consider

Currently, Ecopetrol carries a Zacks Rank #3 (Hold).

A few better-ranked players in the same sector are SunCoke Energy, Inc SXC, Enterprise Products Partners L.P. EPD and Energen Corporation EGN, each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

SunCoke acquires, owns and operates the coke making and coal mining operations. The company delivered an average positive earnings surprise of 302.6% in the last four quarters.

Headquartered in Houston, TX, Enterprise Products Partners is among the leading midstream energy players in North America. It pulled off an average positive earnings surprise of 9.3% in the last four quarters.

Headquartered in Birmingham, AL, Energen is a leading oil and natural gas exploration and production company. It pulled off an average positive earnings surprise of 18.6% in the last four quarters.

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